Eric Le Boucher, the resident neoliberal at Le Monde, has an article which summarises quite neatly the common wisdom of the times (that common wisdon that France has apparently so much trouble swallowing). Here's his list of the 5 things we should stop fighting, and the 3 things we should actually debate.

Globalisation: No country on its own can do anythign about trade. Limits to imports, regulations to prevent offshoring and any other "defensive" tools are useless. Any increase in job protection is irresponsible.

Budget. The implacable combination of tax competition within the EU and existing national debt will prevent any new budgetary spending. Neither the rich, the corporations nor the children (via debt) will pay. Pretending otherwise is a lie

Monetary policy. As Trichet said, the mandate of the ECB will not be changed, and neither will the Maastricht Treaty not the sociology of the members of its council. There will thus be no monetary splurge.

This is actually a pretty good summary of the neolib consensus. and thus the 3 'real' debates are:

Income or free time?. France is 27th amongst OECD countries in temrs of work done per person. That's what debates on income should talk about. The left favors free time? It should state it. The right prefers income? Let the 35 hours be cancelled!

Inequality. Globalisation increases inequality. To prevent people with low salaries from dropping out altogether, France has put in place numerous mechanisms to lower social contributions and taxes for such workers. It's very expensive. Left and right should state what level of inequality they target and what contribution they thus ask from taxpayers.

Job protection. That the "securisation of professional life" theme brings in agreement the CGT [the formerly communist trade union] and the UMP [Sarkozy's party] is suspicious. Left and right should explain their project and state how the burden of risdk is sharedbetween individuals and the collectivity, i.e. indicate where they want to be between the Danish model and the laisser-faire one.

This is all meant as a summary of a book recently published by the Cercle des économistes, a grouping of French economists led by Jean-Hervé Lorenzi, professeur à Paris-Dauphine (Politique économique de droite, politique économique de gauche, Editions Perrin, 15,80 €), but as Eric Le Boucher makes his the above two lists, we can assume that he is in agreement with these, and they actually make a decent description of the what the neoliberals want for continental Europe.

So let's have a go at it.

The 5 hard truths are presented as things that are still debated in France, but vainly, as these things are there and cannot be discussed any longer, being the reality we live in.

Globalisation is certainly a reality, but there is nothing that would prevent a country from staying out of it. It may have a huge economic cost, but it's not impossible. We thus bump up immediately on the first hidden assumption behind this "reality": only the economy matters. Other non-monetary criteria do not even exist to determine policy. Quite a big assumption to make, really. Ask the Iraqis. Or the Ukrainians. I will note as well that the writers of this 'reality bite' are careful enough to say that "individual" countries cannot weigh in - which suggests that the EU has sufficient weight to do so, and impose other rules to trade. what these rules are naturally open to debate, and trying to say otherwise is just a cheap way to try to preempt this debate. In particular, should environmental protection or worker rights be taken into account to determine if dumping (selling below cost) has taken place?

Return on equity. Trying to make the fact that corporations and capital are currently taking advantage of the sudden abundance of labor (thanks to Chinese and Indian labor forces rapidly joining the global markets), and the corresponding relative scarcity of capital into a permanent reality is, one could say, a nice try. Nothing in the current balance imposes that it remain so forever. Those holding capital today are in effect saying: eliminate all taxes, regulations and rules that bother me, and I may come to your country (but may leave at any time, so don't even think of changing the rules after I'm in). And yet, all statistics show that investments take place even in countries that do not follow these 'rules', in significant volumes. So capital can be pragmatic and will go to places that provide good opportunities. These do not come only from low taxes. Good infrastructure, educated workforces, predictable (rather than light) regulation - all paid by taxes - also do wonders. There is thus no reason to listen exclusively to this self-interested discourse. As to the requirement that Anglo-Saxon rules for accounting and governance (hint to Germany: get rid of these pesky supervisory boards where workers - gasp - are overrepresented. Hint to France: get rid of all these worker consultation mechanisms. Hint to all: please hire more London-based lawyers and accountants), it appears to be little moren than an advertisement for services.

Budget rules. While I am generally sympathetic to fiscal rectitude, I'll just point to the example of the USA in the past 6 years to say that this is complete and utter bullshit. If a country decides that it has overriding strategic imperatives to spend a lot of money, it will do so with abandon, and the sanction of the markets will take a while to hurt. With the euro, I expect that the same would apply, should we ever get a government as irresponsible as George Bush's.

Ageing. While ageing populations are real, I don't see why this cannot be dealt with by tinkering with the system occasionally, and taking advantage of regular productivity growth. There is nothing intrinsically wrong with spending a larger portion of national wealth on older people if there are a lot more of them, and countries will find various ways to organize intra-generational transfers on a collective or individual basis. Saying that more work is the only solution goes again with the mindset the perpetual growth of the economy is an absolute requirement, something deeply ingrained in our systems, but by no means compulsory. (more on this below)

Monetary policy. Again, I'm personally sympathetic to a hawkish monetary policy, but I don't see why it's not a legitimate topic of discussion. I'll agree that the current institutional framework deeply embeds the hawkish p.o.v. and changing it would require currently unlikely new treaties at the EU level, but, that said, that does not make it an illegitimate long term goal.

Another, unstated, assumption is , of course: abundant energy will be available at all times. That a column summarising the core economic debates of the day does not have a single word for energy and energy policy (nor for climate change and its consequences) is quite typical of the "common wisdom" and its general cluelessness.

Government for, and by, the corporations does not seem to have much of an ability to look at the long term (the theme of ageing populations is just a gambit by the insurance industry to put its hands now on pensions/social security money). Demand will continue to come from workers (even if they are paid less); infrastructure will continue to be built by the government (even if they should not spend any money to do so), and energy will come from all these pesky foreign countries when they finally get the light and let our good corporations invest there and extract their poorly exploited resources.

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The 3 debates flagged by the above article make a little bit more sense. The topic of work vs free time is a very real one (and part of the larger debate on economics vs other priorities) and it's good to see it mentioned as explicitly. The discussion on inequality is also legitimate, even as it mostly avoids two underlying fundamental truths:

it is possible to fight inequality, as France does and shows, despite all that's said in "truths" 1 to 3 above. It requires heavy government intervention, something that again does not fit well in the above model.

And it requires funds, another subject best avoided, as it brings the vexing issue of the rich whether to tax them (impossible!) or simply to note that they are capturing most of the wealth created by the economy nowadays. Because if this is acknowledged, the question of "why growth?" comes up again: if it all goes to a very small minority, why do we need it? And the debate comes back to "share with us or do without growth - we don't have any anyway"...

Basically, the current wisdom assumes that we are in a situation where there is an endless supply of cheap labor in China (allowing to blackmail European workers with and get them to give up all their "privileges", and to blackmail Western governments with and get them to give up their scandalous attempts to tax and regulate corporations), and an endless supply of energy to make the underlying requirement for permanent geometric growth possible. Energy is the most visible, but that model also assumes an endless supply of other 'commons' that can silently, freely and endlessly provide all our resource needs and absorb all our externalities - raw materials, water, food, and pollution, carbon emissions, etc...

Without even mentioning the geopolitical risks created by the past 5 years of Bush trashing the rest of the world to frighten its domestic population and loot its treasury, I am also surprised by the lack of mention of the global asset bubble we are in. Experience shows that banking crises are the single most damaging cause of recessions (or depressions) historically, and the splurge of the past years puts earlier bubbles to shame. Consumer price inflation, and wage inflation are currently non-existent thanks to the global deflationary impact of Chinese manufacturing, but asset inflation, despite being ignored by (most) central banks, is very real and absolutely unsustainable, and has led banks and financial markets to make increasingly ludicrous bets, many of which will fail in the not so distant future.

So, will it be energy shortages or price peaks? A financial crisis? Or a major environmental breakdown in China? but I bet that in 10 years' time, the 5 truths above will look faintly ridiculous, like the gospel of a new (and then past) gilded age.

I'm just a bit confused about your term of "neo-liberal". To me the statements sound like the positions of mainstream, big business supporting, economists. I suppose the acknowledgment that there needs to be a continuing effort at social services makes the position "liberal" (at least compared to the US). Perhaps it is just a French term with different connotations than in the US.

To me a liberal (neo or otherwise) is one who supports human rights in the broadest sense over those of big business. It would appear that there is a general lack of ecologically aware economics in Europe just as in the US even though the Greens are in government.

Is there no one willing to discuss a steady-state economy, or is that your point?

The many uses of the term "liberal" have often been discussed here. They generally cause confusion between Americans and Europeans. For continental Europeans, "liberal" above all describes laissez-faire economics (those of the C19 English Liberal Party). A "neo-liberal" is hence a contemporary proponent of those policies.

Quite different from the generally-accepted sense of "liberal" in the US.

If there are people here who have actually read Adam Smith and John Stuart Mill, I want to be a part of it. Just started reading Wealth of Nations this summer and I can't believe how much it is helping me understand the language we use to talk about property and labor, employers and employees, free trade, etc. I can't believe how long it took me to get to it. Adam Smith really conceptualized everything, and not being a student of economic history, but being a regular television viewer, it seems to me our everyday concepts about the economy have not changed much since 1776.

I recall post keynesians discussing TINA online in the early 90's, before blogs were invented. Its as if the present system of globalisation of wealth flows "just happened", rather than following a long process of fighting to win reductions in regulation of capital account transactions.

in such a context, sorry. That's why I usually write "neoliberal", which combines the neo of the neocons with the French meaning of liberal, which is more in the laisser-faire, pro-free-trade tradition. and actually, in France, the most used word is "ultralibéral", which is usually meant to describe reaganite or thatcherite preferences.

Yes, that would be the mainstream economist view (still seen as rightwing propaganda in France to some extent) indeed.

It is not that there are no ecologically aware economics, it is that they are fighting the same kind of consensus here as there (and in addition, in France, as afew may recount better than I, the greens must fight the pro-industry leanings of a goo chunk of the traditional left).

and as that article points out, ecological issues, energy, sustainability are not even on the radar of the mainstream.

i.e. indicate where they want to be between the Danish model and the laisser-faire one.

I love the stakes in this little neoliberal exercise...

If France was applying the Swedish or Danish (not to talk about the recent German) model, the French left would rise like one man and cry out "fascism"...

The Swedish model (which I know best) is not to the left of the French one regarding working hours, retirement age, education etc... even if depends on heavy taxation... which gives you an idea of what the French "neocons" have in mind...

If France was applying the Swedish or Danish (not to talk about the recent German) model, the French left would rise like one man and cry out "fascism"...

I found that juxtaposition between the Danish model and the free market model peculiar as well. I was like, "So what, is the Danish model now widely accepted by French people as the one France should be striving to emulate?"

Out of curiosity, what do you understand to be the key features of the Danish ("Nordic"?) model, and how are those similar/different from the "French model" and the "neo-liberal" model?

maximum legal length of working hours : 40
if it's necesseary for the activity max 48-50 h during a month (this is not "overtime")

overtime : max 200 h/year
= 16/h month

compare with the French 35+4

What I know of (I lived in Sweden until 1999) a shortening was never a serious question for the unions.

Pension age :

you can chose to go at 61, but you get the lowest pension (even if you had a very good income). The normal retirement age in Sweden has "always" been 65. It's possible to retire as late as 70 and financially it's very interesting : it gives you round 600 more a month.

employment :

you don't need a "contract" for short time jobs. Just a paper from the employer that you have been hired. Since taxes are taken at the source, it's very easy to combine period of unemployment and work legally and transparently, thus guaranting a "decent" income until
you get a full time job on contract. All periods of work count for unemployment.

It's very easy to be fired (with motive) and the compensations are very little, if even existing when you are on short term. Compare with the French CPE + motive.

Return on equity. It is impossible for Europe to ignore Anglo-Saxon rules for the economy, including accounting, governance and minimum returns on equity.

As you point out, the global labor supply shock which has tilted returns from labor to capital, is not permanent. In the long run it will even out. But, as you often point out, in the long run we are all dead.

So if you excuse my constant Dalahästing, we do have a quite good partial solution to that issue in Sweden. ;)

If the capitalists are going to profit more than the workers in the future, the easy solution is to make sure that workers simply become capitalists.

The reform which pushes us in that direction also solves another issue, namely:

Older populations. Any program which does not include ways to increase time worked over life cannot be taken seriously.

I am of course talking about the brilliant Swedish pension system, which George W Bush tried but failed to implement in his country.

It works like this. When you work your wage is taxed. Some of the money is saved for your retirement. The relevant thing here is that the money is not spent on the retirees of today, but the money is saved for you. This means the system completely avoids the demographic cul-de-sacs. And as long as rudimentary wage equality is maintained (continental perspective: strong equality, anglo-saxon perspective: insane alien equality), everyone will get a reasonable pension.

And as the money is placed in bonds and equity (you even get to decide how some of the money is placed), everyone becomes a capitalists. Off course, the fringe left raged over them being forced into capitalism, but that was just an extra bonus.

I thought the fringe left was enraged because unless you assume that the stockmarket is going to go better then the economy in general, that reform cut pensions with some 30% compared to the previous level. But I guess that is just the fringe left getting worked up over nothing.

Of course, there is one group that will garanteed benefit from this, stockbrokers gets their commision anyway.

And while it is true that pensions in general were lowered, those pensions were unsustainable as they were based on a completely different demographic reality where there were many young and working people and few retirees.

Maintaining the old pensions would have required extensive and permanent borrowing, which is the same as leaving all the debt as future taxes for our children and grandchildren. Just as emitting vast amounts of CO2 destroys the climate for those very same people.

This means that this is another of all the positive economic trends that converged on my parents generation (those born in 1940-1950), who are richer, more highly educated and healthier than any generation before or after them. This is an intergenerational inequality we will all have to live with. Hopefully they will not spend all their capital (economical, ecological etc) before they die and leave some for us.

On the flip side, for a very large part of their lives they lived under the constant threat of impending nuclear annihilation, something we thankfully do not do. This must count as an improvement in the standard of living, even though it is not included in the GDP.

Actually this is an illusion. All government programs are pay as you go. If you save now and put it into bonds then the government is spending your money now and replacing it with a promissory note to be paid off later (that is by the taxes of future generations).

The same is true of the US Social Security "trust fund". The excess money that is being accumulated now is put into special treasury bonds while the actual cash is transferred to the general fund for current expenses. At some point in the future current contributions won't equal current payout and the bonds will be redeemed. The only source of funds to do this will be the taxes in effect at that point.

The brilliant idea about the US Social Security program is that it is not a retirement fund. It is retirement insurance. As an insurance plan some people come out worse and some better. The conservatives like to harp on the fact that people who are healthy and wealthy and wise can do better than the average if they invested the money on their own. What they ignore is the risk factor. If tomorrow you are struck down you can no longer contribute to your retirement plan and may end up impoverished.

This is all part of the Libertarian theme that every man is in it for himself. The exact opposite of what two hundred years of communal government programs have worked to eliminate. That is: we are all in this together.

I had a boss once who resented paying Social Security. He claimed he was doing so much better in the stock market (I think it was IBM). Then IBM almost went broke and he lost his entire nest egg. I'm sure when it came time to retire he was grateful for the Social Security.

Investing in the stock market is also a high risk option. There was a period of over a decade starting in the early 1970's when stock returns were zero to negative for the entire period (and this followed a crash of about 30% the previous two years).

Stocks have done better since the late 1980's because of the rise in demand due to the use of mutual funds and stock retirement funds. As the population ages the new money flowing in will become less than that being taken out and demand will fall. This will lead to poor stock performance.

What is striking in this text (as in many similar ones) is that it shows the growing fear of the defenders of the dominant ideology (the so-called "common wisdom"): they want to prevent debate to take place at any price. The more the facts contradict their beliefs, the stronger they fight to maintain the dogma.

And the stratagems are always the same:

1 - They highlight a phenomenon which is (more or less) true (like globalisation) and they link to it something which is presented as an unquestionable consequence(like the abandon of job protection), whereas it is in fact the result of a policy choice.

2 - They present a current dominant trend (like the exorbitant expectations on return on equity) as something that cannot be changed, whereas fiscal or financial solutions can be imagined.

3 - They caricature the opposing point of view ("the rich will pay", "the companies will pay"), to dismiss any debate about inequalities, a better sharing of wealth or redistribution.

In fact, these so-called economists are no longer scientists, they are the new Holy Office of the Inquisition, (or, better, the Sacred Congregation for the Propagation of the Faith) in charge of excommunicating anyone who questions the doxa.

As for their predecessors, the best destabilising question you can ask them is: Why?

Why does globalisation forbid imports control (in fact, many countries use them, including the "anglo-saxons")

Why is the deepening of inequalities unavoidable ? Is it impossible to think of an economic system of governance that prevent it? (it has been the case in Europe until the end of the 70's and it is still the case in Scandinavian countries)

And so on...

Their frantic defence is another proof that the time has come to question the dominant model and to promote new ones... This is the purpose of the Forum for a Responsible Globalisation, of which the lauching event was a great success.

Globalisation: No country on its own can do anything about trade. Limits to imports, regulations to prevent offshoring and any other "defensive" tools are useless. Any increase in job protection is irresponsible.

And of course neither can we discuss what happens at the WTO meetings and what policies are enacted there. I guess that would be irresponsible to...